Government Announces Steps Required to Provide Further Impetus to Economy

The two vital components of the policy changes that stand out and need additional attention are (i) effective auction mechanisms to assist the flow of capital. LifetimeStock

The recent announcements by the Government of India regarding FDI in single-brand retail, changes to FPI surcharges and renewed talks about monetising state assets has once again brought the focus back on the next steps required to provide further impetus to the economy. The two vital components of the policy changes that stand out and need additional attention are (i) effective auction mechanisms to assist the flow of capital and (ii) promotion of competitive industries.

The fundamental essence of the policies undertaken so far has been to deregulate and assist the flow of capital. Utilising an adequate but less onerous regulatory regime is at the heart of creating and implementing growth-oriented policies. As we move ahead, we must keep an eye on the two focus areas.

Firstly, auctioning government assets and Public Sector Units (PSUs) to generate both much-needed capital as well as efficient organisations is an area that needs urgent attention. The vital aspect of the auctions is to create a template that can be improved upon in the future. And for the template to be developed for the auctions, it is vital to bear in mind that the complexity of government assets that can be auctioned vary significantly. Therefore, the warranted path for auction of Government assets must be cognizant of the complexities involved.

Initially, the process must focus on assets that have a predetermined use and a market value that is easier to assign such as businesses with physical assets that can be valued at market, such as industrial plants. Auctioning off of such assets is easier to decipher and will assist in giving the auction process the much-needed momentum. Once the auction process gains momentum, auction of more complex assets that pertain to “rights” can be attempted. More complex assets are the ones where assigning the “right to usage” may be complicated due to a lack of a visible market price.

The recent announcements by the Government of India regarding FDI in single-brand retail, changes to FPI surcharges and renewed talks about monetising state assets has once again brought the focus back. LifetimeStock

The initial auction process would do well to deal with say a business that can produce a specific marketable commodity that can be priced using prevalent market prices. Auctioning an asset that is easier to price will attract investors and inspire public confidence in the process. Auctioning off a factory that can produce a specific product is an example of such an asset. Valuing the asset under consideration is relatively more straightforward. Auctioning off an asset whose usage may have varied options, is harder to price because the optionality may be harder to value, to begin with. The key “mantra” for creating the much talked about asset-monetisation process is executing a plan that is ï¿½measured’: starts from the simple, gradually move towards complexity.

The capital that the auction process generates must be taken as “risk-capital” to help stimulate Indian investments. More importantly, the money generated from such auctions can be used to untangle the domestic credit that is stuck in non-performing assets (NPAs) and provide a boost to new domestic investments. Fundamentally, the capital generated from the monetisation process will significantly improve the velocity of credit flow. While the quantum of money the new regulations and effective auctions can create is vital, the ability of the new policy moves and auctions to be a catalyst forunleashing domestic capital is of equal importance.

The second area that deserves attention from a deregulation perspective is “pricing”. To assist the higher flow of capital, promoting investments and pushing for more significant economic growth, the government must look to encourage competition in sectors rather than hunting for price-caps. While for essential commodities price-caps may be necessary, in general, introducing price-caps or “rent-control” has unfavourable long-term implications which may be counterproductive for economic growth and judicious capital usage.

The reason is not far to seek. One result of “rent-control” or price-caps may result in businesses reducing capital expenditure and investments and focus on capital recovery by “squeezing” assets. Sectors need to be made attractive for companies and investors to boost investments and growth. Hence the aim must be to promote capital flow using policies, instead of restricting investments due to limitations (like a price cap) imposed on the market.

In general, the aim of government policy must not be to set prices but to encourage a competitive industry, that ensures innovation and fair pricing. To ensure that customers get a fair price, the government must provide a competitive industry; not a “rent-control” regime. Artificial price-caps promote the exact opposite behaviour of that intended by policymakers such as low-innovation, low-investment and decline in product quality.

Deregulation of markets to promote investments and economic growth is the path forward. Effective auctions and competitive industries are vital cogs in the economic growth wheel that can contribute significantly to tide over the current issues and boost long-term growth. (IANS)

a policy decision of great administrative value was taken by the Centre to put the newly inducted officers of all these services together for a short 'Foundation Course.' VOA

In a democratic dispensation the first duties of the elected political executive governing the nation are to bring about development of all and ensure protection of citizens from internal and external threats. The political leadership exercises the sovereign power to this end through the bureaucratic machinery — that includes the police — headed by the officers of All India and Central Services who were recruited, trained and placed in various wings of the government to implement the policies flowing from the top. Years ago a policy decision of great administrative value was taken by the Centre to put the newly inducted officers of all these services together for a short ‘Foundation Course’ at what is now the Lal Bahadur Shastri National Academy of Administration (LBSNAA) at Mussoorie, before they dispersed to join the establishments of their respective services at other places for a full length specialised training.

The foundation course had the merit of letting all probationers know each other and putting them on a common grid of understanding of the great cause of national governance that they were going to share in their long years of public service ahead. It would lay the turf for an assured cooperation among them whenever they would have an occasion to work together in future to carry the mission of governance forward. It all began in 1960 the year of my joining the IPS and I could see the benefit of that participation in my own experience. A long time later when I became the Director Intelligence Bureau, I interacted with the Secretaries at the Centre and the Chief Secretaries in the states whom I had known at Mussoorie — which made the sharing of thoughts with them on matters of national importance so easy. What worked was an understanding that we were all together in serving a higher cause.

Headed by the officers of All India and Central Services who were recruited, trained and placed in various wings of the government to implement the policies flowing from the top. Wikimedia Commons

Today India is grappling with the challenge of pursuing economic growth of a nation of 1.3 billion people spread across far corners of the vast country and placed in uneven conditions of development. The officers of the Civil Services on whom falls the responsibility of implementing the development policies of the Centre are finding it easier to coordinate the efforts that cut across various ministries and institutions — somewhere because there are no psychological barriers amongst them. In the domain of development they had enough shared experience to put their heads together in a meaningful way. They had knowledge of various facets of what constitutes development — financial, agriculture, infrastructure, forestry, public health and so on. The recall of the foundation course definitely helped in all of this.

While the orientation of Civil Services to the tasks of development is adequate the national scene points to the need for an awareness programme for all Civil Services — as they advanced in their career — on the share of responsibility that would fall on them directly or indirectly, in the sphere of securing the nation and the citizens at large against threats both internal and external. Security for all is also the concern for all and should not be deemed to be something relegated completely to the care of a national security set up and the specialised agencies besides the Police. Warren Christopher, the then US Secretary of State, famously said in 1993 that ‘national security was inseparable from economic security’ and today it is known that the targets of a ‘proxy war’ include economic assets and the industrial life-line — since damaging these weakened the opponent far more effectively than an open war would do. Those handling governance at decision making levels have to have an understanding of the economic dimensions of national security.

For all of this it becomes a requirement of the time that senior officials across the spectrum of governance — who are adept at handling development — should also be fully informed of the national security imperatives that the governance had to reckon with. A little exposure to what was the state of affairs on the national security front and the developments of strategic import happening in the world outside, in an early stage of their training might prove quite rewarding for them. In the age of knowledge that is upon us ignorance is not a bliss and an awareness of the environ in which the national government was responding to the call of both development and security would be a great asset. A short module of discussion on matters related to national security in the Foundation Course for All India and Central Services would go a long way in providing a minimal basic orientation on the subject that would remain with the senior officers for the future and contribute to a sound decision making by them in later years.

Subjects that would qualify for being included in the presentations by professionals and strategic analysts include National Security Scenario & Policy Responses, Terrorism & Maoism, Disaster Management, Dimensions of Drug Traffic and India’s National Security Set Up & Intelligence Agencies. Every functionary of the government — and even the citizens at large — ought to be aware of their responsibility towards safeguarding national security. We are in an era of covert offensives, an open external attack of the enemy is not the only threat to the nation. Our defence forces are always in a state of readiness to deal with an open warfare. In the Indian context the reality of a proxy war being conducted by a hostile neighbour underscores the importance of our counter-intelligence capabilities that security is all about. Both defence and security have to work together to produce a perfect response. Kashmir has been a testing ground for the success of Intelligence based operations of army and para military forces — the challenge being of neutralising the infiltrated terrorist without collateral damage. Those who man the senior positions in the civil side of the government can benefit from an early exposure to an orientation programme on the lines suggested above. (IANS)